Board composition and sustainable supply chain management: Environmental committee's role

Abstract

Due to increasing climate change concerns, companies are under pressure from stakeholders, including regulators, consumers, and investors, to integrate environmental initiatives into their sustainable supply chain (SSC). Although an increasing body of research investigates the predictors of the environmental practices of firms, focusing on predictors of SSC practices is of critical importance to reduce environmental externalities such as carbon emissions and waste production. Thus, we focus on several board attributes' roles in firm SSC practices and explore whether the environmental committee enriches the directors' role in firm SSC practices. This study uses 62,958 firm-year observations from 2002 to 2021 covering nine different industries from 69 countries. Executing sector-country-year fixed-effects regression, we indicate that while board independence and board gender diversity reinforce the adoption of SSC practices, board expertise and board tenure weaken their adoption. Furthermore, the environmental management team positively moderates between board gender diversity and board tenure and SSC practices, whereas it does not have a significant moderating role between board independence and expertise and SSC practices. We contribute to the literature by identifying which directors are for and against transforming supply chain function towards more sustainable practices such that firms’ nomination committees can shape their upper-echelons accordingly. In addition, our comprehensive SSC proxy based on five metrics-index may guide firms in formulating their own SSC policies. Lastly, we advance the existing literature by highlighting the role of the environmental committee in mobilizing board capital for better SSC management.